This paper begins with a review of the methods and assumptions used to measure capital service flows. Two data series on capital inputs in U.S. agriculture are briefly described and compared. We show that measures of capital services are sensitive to the treatment of interest rates. Notably, the use of fixed versus variable market rates significantly affects measures of the quantity and productivity of agricultural capital in the United States. We conclude that when calculating capital usage in U.S. agriculture, the use of a fixed interest rate generates more plausible estimates than the use of an annual market rate.
Bibliographical noteFunding Information:
MattAndersen is an assistant professor in the Department ofAgri-cultural and Applied Economics at the University of Wyoming and a research fellow at the International Science andTechnology Practice and Policy (InSTePP) Center at the University of Minnesota; Julian Alston is a professor in the Department of Agricultural and Resource Economics, University of California, Davis and a member of the Giannini Foundation of Agricultural Economics; and Philip Pardey is a professor in the department of Applied Economics, University of Minnesota and Director of InSTePP. The authors gratefully acknowledge John Smylie and the Association of Equipment Manufacturers for assistance in making data available, and thank Barbara Craig and Eldon Ball for their input, insights and help with access to data. The work for this project was partly supported by the University of California; the University of Minnesota; the University of Wyoming; the USDA’s Economic Research Service, Agricultural Research Service, and CSREES National Research Initiative; and the Giannini Foundation of Agricultural Economics.
- capital stocks and services
- interest rates
- rental rates